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Regionalism or Multilateralism? A Political Economy Choice

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  • Giorgia Albertin

Abstract

This paper provides a political economy analysis of the incentives underpinning a country's decision to enter a regional trade agreement when a multilateral free trade agreement is available, and of how entering a regional trade agreement affects the incentives to pursue multilateral trade liberalization. Taking into account the influence exerted by organized interest groups in the formation of trade agreements, we derive a formal condition under which a regional trade agreement is preferred to a multilateral one. Furthermore, we show that a country's decision to enter a regional trade agreement unambiguously undermines the incentives towards multilateral trade liberalization.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/65.

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Length: 26
Date of creation: 01 Mar 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/65

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References

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  1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  2. Pravin Krishna, 1998. "Regionalism And Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 227-250, February.
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  9. Bagwell, Kyle & Staiger, Robert W, 1997. "Multilateral Tariff Cooperation during the Formation of Free Trade Areas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 291-319, May.
  10. Bond, Eric W. & Syropoulos, Constantinos & Winters, L. Alan, 2001. "Deepening of regional integration and multilateral trade agreements," Journal of International Economics, Elsevier, vol. 53(2), pages 335-361, April.
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  14. Winters, L. Alan, 1996. "Regionalism versus Multilateralism," CEPR Discussion Papers 1525, C.E.P.R. Discussion Papers.
  15. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
  16. Desruelle, Dominique & Richardson, Martin, 1997. "Fortress Europe: Jericho or Chateau d'If?," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 32-46, February.
  17. Ornelas, Emanuel, 2005. "Trade creating free trade areas and the undermining of multilateralism," European Economic Review, Elsevier, vol. 49(7), pages 1717-1735, October.
  18. Ornelas, Emanuel, 2005. "Endogenous free trade agreements and the multilateral trading system," Journal of International Economics, Elsevier, vol. 67(2), pages 471-497, December.
  19. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
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